In 2014, the Internal Revenue Service (IRS) expanded the events that would allow employees to drop their health plan coverage under their employer’s cafeteria plan. As a reminder, the general rule is that once an employee enrolls in his or her employer’s group health plan through a cafeteria plan – which is what allows the employee to pay his or her required premiums on a pre-tax basis – that enrollment is irrevocable for the entire plan year unless a qualifying “change in status” event occurs. In order for an employee to change his enrollment election, the change in status event also must affect the employee’s (or his spouse’s or dependent’s) eligibility for the health plan coverage. Typical change in status events include marriage, divorce, birth of a child, change in status from full-time to part-time, etc.
The IRS added two new events that allow employees to drop health plan coverage, even if the events do not affect an employee’s eligibility under his or her employer’s health plan coverage:
An employer is not required to allow employees to drop coverage due to these new events, but if an employer wishes to do so, an amendment to its cafeteria plan is required. Employers who have already permitted employees to take these actions since 2014 have until the last day of the cafeteria plan’s 2015 plan year (for most employers, December 31, 2015) to retroactively amend their cafeteria plan to reflect these rules. Employers who wish to add these rules on a go-forward basis, such as for the 2016 plan year, must amend their cafeteria plans by the last day of the plan year in which the elections are first allowed, provided the amendment is retroactively effective.